Cities deal with severe financial stress

Cities across Michigan and the country are facing budget shortfalls and revenue problems and, at some point, something has to be done to address them.

While most cities take steps to avoid dire financial situations, others are mismanaged and fall into receivership.

Either way, when officials decide it’s time to address the issue, it includes cuts.

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The question then, is, what do they cut?

Experts say it depends on the situation.

“I don’t think there is a single plan of action, and part of the challenge is as you try to make cuts in a city you still have demands for service,” said Anthony Minghine, associate executive director of the Michigan Municipal League.

Nonessential services, such as parks and maintenance, usually are slimmed down first, Minghine said, to try to avoid public safety cuts.

“If you make deep, painful cuts to a city this year, next year your property values will fall,” he said.

A growing number of municipalities in Michigan are feeling the pain, as not only is state-shared revenue declining, but also as property values go down, so do tax collection rates. Those two areas make up a majority of cities’ budgets, with property tax revenue typically being more than 50 percent.

Personnel salaries and benefits make up the bulk of expenses for municipalities, which is the reason union contracts and employee compensation also are reviewed for reductions.

Joyce Parker, emergency manager in Ecorse since November 2009 and now in the same position for Highland Park Public Schools, laid off more than 35 city employees in Ecorse, about one-third of its workforce.

She now is in Ecorse part time as the city of about 9,500 residents has erased its deficit under her watch. However, the action she took was not without controversy.

“I’m not going to say everybody’s happy because they’re not, “Parker said. “It’s been a painful process. Downsizing has not been easy. It’s required a number of changes and a different way of thinking about how you operate.”

Minghine said government entities take longer to fix than businesses because of the limits on raising revenue and the importance of keeping core services and amenities intact.

“It’s going to be a longer fix for them and it’s going to be a slow fix, unfortunately,” he said.

Parker said that when she got to Ecorse, she first looked at the city overall to see what shape it was in.

“Basically, what I did was actually evaluate the overall city operations,” she said, “every department, all aspects of the operation. And, I developed a new financial plan, and the plan basically kind of laid out what kind of options were available to make changes.”

Ecorse had a deficit of $14.6 million and a general fund of about $11 million. Its former mayor and controller had been found guilty of bribery and corruption charges and were sentenced to prison terms.

Parker restructured departments, brought the Department of Public Services back in house, saving $2.2 million a year instead of privatizing the services, and sought ways to raise revenue.

Basically, when a city is proactive, deep cuts aren’t always necessary, experts said, but when the situation gets bad, as in Ecorse, anything and everything is looked at for reductions.

The mayor and the City Council took 50 percent pay cuts and then took another 25 percent hit after that. All elected officials in the city are part time. The treasurer and assessor’s salaries were halved and the city clerk’s pay was reduced by 35 percent. Other positions were eliminated via attrition.

When it came to unions, Parker was able to get concessions from some, like police, but not the Fire Department. The president of the local union has been critical of her in the past, saying she refused to negotiate.

Mark Docherty, president of the Michigan Professional Fire Fighters Union, said emergency managers in the four cities affected across the state all have been reluctant to negotiate. Public Act 4, signed into law in January 2011, gave them the power to change collective bargaining agreements without negotiating.

Docherty, like many public safety personnel, is critical of PA 4 and said there is no use for the law. Firefighters and police are aware and understand that cities are strapped for cash these days and cuts to personnel puts everyone in danger, he said.

The cuts are “so drastic and draconian that it puts in danger the safety of not only our members, but the people we are supposed to protect,” said Docherty, a police lieutenant in Sterling Heights.

Even with mutual aid agreements, because the cuts are happening everywhere, there could be a point where there is an event that first responders would not be able to get to in time to minimize damage, he added.

“Communities are theoretically rolling the dice and hoping nothing bad is going to happen,” Docherty said.

Parker outsourced the ambulance service, laid off several firefighters and changed nine of them to part-time status. Three police officers also were laid off, but one was brought back via a federal grant. The other two returned for part-time work but now have left because an agreement with the union expired.

It’s a difficult thing to do, to balance a budget and reduce public safety personnel, Minghine said, because there is always a need for police and fire services.

“That balancing act is more complicated … because there’s no diminishing demand as in private business,” he said.

There is widespread support among firefighters to consolidate departments in an area and combine four or five departments into one regional department, Docherty said. That would get rid of all but one chief position, thereby saving enough money to hire entry-level firefighters and make operations more efficient, he said.

It also is an idea on the table for police departments. The problem, though, according to Docherty, is that some city officials don’t want to give up their police or fire departments.

“Political will and power are the two reasons they don’t want to consolidate,” he said.

Contact Alan Burdziak at 734-246-0882 or aburdziak@heritage.com. Follow him on Facebook and @AlanBurdziak on Twitter.